russian Industry Imitates Import Substitution, Degrading Technologically

As of February 2026, most russia’s manufacturing companies have been unable to find adequate domestic replacements for foreign spare parts and equipment. Businesses have partially adapted to the sanctions regime in the only way available to them – by reducing product quality and production efficiency. In 2026, the number of enterprises reporting a deterioration in product characteristics due to dependence on imported components increased, as did the share of companies forced to restructure their technological chains due to the inability to replace imported raw materials with russian analogues.

In a number of industries, “formal import substitution” is thriving. In machine tool manufacturing, the share of domestic production in the final product has reached 70%, but dependence on imported numerical control systems and sensors remains at the level of 80–95%.

Systemic problems have not gone away: the difficulty of finding alternative spare parts, rising costs and final prices, and limited opportunities to work with suppliers from “friendly” countries. Since 2024, negative factors have consistently outweighed adaptive ones. According to S&P Global, the manufacturing business activity index stood at 49.5 points in February 2026, below the threshold of 50, indicating a prolonged decline in manufacturing activity.

The industry is moving towards a model of “partial import substitution”, in which only the assembly of final products is localized, while key technological components continue to be imported. Certain indicators of industrial activity are supported exclusively by defense production, while civilian sectors are stagnating.